New Delhi, India: ICRA has revised its domestic air passenger growth projection for FY26 to 4–6%, down from the previous estimate of 7–10%. This adjustment follows a modest 0.3% year-on-year increase in passenger traffic to 13.17 million in August 2025. The revised forecast anticipates a total of 172–176 million domestic passengers for the fiscal year, compared to 165.4 million in FY25.
International air traffic growth estimates have also been reduced to 13–15% for FY26, from the earlier projection of 15–20%. Factors contributing to this downgrade include geopolitical tensions affecting flight operations, decreased travel confidence following a recent aircraft accident, and global trade challenges such as the impact of U.S. tariffs.
Consequently, ICRA projects the aviation sector’s net losses to widen to ₹9,500–10,500 crore in FY26, up from ₹5,500 crore in FY25. This increase is attributed to slower passenger growth amid rising aircraft deliveries and operational hurdles.
Industry capacity also declined, with capacity deployment in August 2025 dropping 5.8% compared to the same month last year. Supply chain disruptions and engine issues, particularly involving Pratt & Whitney engines, have led to approximately 133 aircraft being grounded as of March 31, 2025, accounting for 15–17% of the total industry fleet.
Despite a decrease in aviation turbine fuel (ATF) prices, cost pressures persist due to the dollar-denominated nature of key operating expenses, including fuel, aircraft leases, and maintenance. These factors continue to impact airlines’ profitability.
ICRA notes that while some carriers benefit from strong parental support and adequate liquidity, others may face challenges in maintaining credit metrics and liquidity profiles in the near term.
